China's central bank said on Monday that it has authorised the nation's interbank foreign exchange market to start direct trading between the Chinese yuan and the Singapore dollar.

The step will help promote the use of the yuan and Singapore dollar in bilateral trade and investment and lower currency trading costs, the People's Bank of China said in a statement on its website, www.pbc.gov.cn.

Sources with direct knowledge of the matter have told Reuters that China's interbank foreign exchange market will kick off direct trading between the two currencies this week.

China has already launched direct yuan trading with major currencies including the euro, sterling, yen and the Australian dollar.

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